HMRC recently announced that they are encouraging those have not been efficient in sorting out their taxes to come forward and deal with their tax matters now. In return HMRC have stated that they will be lenient on those who come forward and voluntarily disclose their financial information.
HMRC regularly launch campaigns to enable those who are a part of a particular industry to come forward and disclose their financial information and settle their tax liabilities. HMRC state that during these campaigns, if people do not come forward within the time specified then the penalties would be a lot harsher if it is later discovered that their earnings or financial information was not disclosed. The campaigns have been described as a tax penalty amnesty and HMRC believe that this incentive will encourage people to sort out their tax matters whilst avoiding harsh penalties.
Wider Impact Campaign
HMRC have previously launched campaigns for off shore savers, doctors, electricians and plumbers to come forward and disclose their financial information voluntarily. However, HMRC now also have a ‘wider impact campaign’. This means that anyone who has not previously declared their earnings or relevant financial information now have the opportunity to do so regardless of the industry they are in, and in return HMRC have stated that they will be lenient when considering the penalties.
Direct Selling Campaign
HMRC currently have one targeted ‘live’ campaign which is targeted at those who are involved in “direct selling”. HMRC state direct selling “may involve demonstrating a product in a customers’ home, sometimes at a party, or you might sell door to door, using catalogues. You might only sell to your friends and relatives. As a direct seller you will usually take commission on the sales you make. You may be involved in direct selling as a full time business, to top up your income from another job or to fit around your caring commitments”.
Therefore if you are direct selling then you should contact us immediately as the campaign ends on 28 February 2013. We will be able to assist you in negotiating any penalties with the HMRC.
It has been reported that future HMRC voluntary disclosure campaigns are going to be targeted at the following sectors:
- Those who sell items over the internet or at car boot sales. Analysts state that this is very unlikely to be those who sell the odd household item, but is more aimed at those who regularly sell items with a view to a profit;
- Self-employed people who do not disclose all their earnings;
- Those with second homes who do not declare their rental income;
- Businesses and self- employed people who are not charging VAT properly (i.e they are not VAT registered when they should be
HMRC have also indicated that they will once again be targeting the ‘trades sector’ which includes carpenters, joiners, brick layers, roofers and others involved in the building trade.
How are HMRC going to be lenient?
Under normal circumstances if HMRC investigate your tax matters and find that you have not paid the amount of tax that you were meant to or that you have failed to disclose financial information then HMRC can penalise you in a number of ways, which could include imposing a penalty of up to 100% of your tax liability or even prosecuting you.
HMRC work out the penalties using various factors, including calculating the amount of potential lost revenue, determining ‘behaviour’ of the tax payer, deciding whether the disclosure was prompted or unprompted and considering the HMRC penalty ranges. For example is someone deliberately concealed financial information from HMRC and HMRC prompted them to provide the information then the person could face penalties of between 50% – 100% of the tax liability.
The advantage of the ‘wider impact campaign’ or a targeted campaign are that HMRC would be willing to significantly reduce the penalties and in some cases may even waive the penalties altogether. There may also be some instances where the HMRC decide not to prosecute those who have failed to disclose information previously, due to the fact that the disclosure made during the campaign was unprompted.
Our solicitors have the specialist knowledge and understanding when negotiating penalties with the HMRC. We do this by making detailed representations on your behalf to HMRC specifying any mitigating circumstances and explaining why your tax penalties are excessive.
So what shall I do?
It is important to note that HMRC exercise their discretion when reducing or waiving penalties and consider each case separately. HMRC have by their own admission stated that where there are systematic fraudulent matters they will not hesitate to commence prosecution even if the disclosure of the information came as a result of a campaign. Although it is safe to assume that if you disclose your financial information voluntarily then the HMRC are likely to be more lenient when deciding what penalties to impose.
If you are under the impression that you should not disclose financial information because you have ‘got away with it’, then the advice would be to disclose the information now rather than later or never, regardless of which industry you belong to. This is due to the fact that HMRC are likely to impose harsher penalties if they later discover that you haven’t disclosed the information.
If you find yourself in a position where you need to disclose elements of your earnings or elements of your financial information for previous years then you should contact us as we work with specialist tax advisers who will be able to establish your tax liability. Our specialist solicitors are subsequently able to robustly negotiate the terms of any tax settlement with HMRC. Alternatively, we are able to work with your accountant to ensure that collectively we are able to obtain the best possible outcome for you.
Our Tax Disputes professionals are available to give information and advice in negotiating penalties with HMRC. To contact one of our specialist Tax Lawyers please click here or call 02071830529.
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